Active ETF TSPA Outshines S&P 500 In 2023

A new year brings the opportunity to take stock of past and future trends and examine the strategies that stood out the year before. One strategy that stood out, beating the S&P 500 with an active ETF approach, was TSPA, the T. Rowe Price U.S. Equity Research ETF. In a year that saw active ETFs grow significantly in assets and interest, TSPA did well. So, what might the ETF’s outlook be for 2024?

See more: Don’t Forget Concentration Risk Entering 2024

It might be instructive to start with the numbers for TSPA in 2023. The active ETF returned just shy of 30% between January 2nd, 2023, and January 1st, 2024. (See chart below.) That outperformed the S&P 500 for almost the entire year, culminating in TSPA outdoing the index by more than 3.6%. For an ETF soon to hit its three-year ETF milestone, it’s also worth noting it’s quickly approaching $100 million in AUM.


Active ETF TSPA has outperformed the S&P 500 over one year, per YCharts.

The strategy’s active approach looks for long-term capital growth by providing similar sector and economic exposure and a similar risk profile as the broad-based S&P 500. The portfolio is designed to serve as an active complement, or outright replacement, for core equity exposure often held by the S&P 500. However, in doing so, it aims to outperform the index by selecting the stocks of the portfolio through fundamental research led by specialized industry analysts. The thesis being that skilled research teams are better equipped for ongoing security analysis than an annual index committee.

That has led it to names in the Magnificent Seven. Still, there are also robust firms in other sectors, with industries weighted towards a goal of being sector-neutral. For example, it currently holds Home Depot (HD) and Salesforce (CRM), solid names in consumer cyclical and tech, respectively.

Active ETF TSPA’s Role in 2024

With the strategy set to pass that three-year mark, a threshold important for many brokers and investors, it could accelerate even more. So, what role can it play entering 2024 following such a strong year in 2023 for active?

Markets may have already priced in some rate cuts, but they aren’t guaranteed. Indeed, an active ETF can play a big role in a rate-cut scenario that boosts a slowing economy or a steady-as-she-goes stubborn inflation, “eh” growth outcome.

Active managers bring experience and adaptability to an equity strategy. This can help amid an uncertain but appealing outlook, such as what markets are facing this year. Charging only 34 basis points, TSPA may be one solid active strategy to watch.

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